The Pensions Regulator (TPR) is seeking to gain statutory powers through a new ‘Pension Reform Bill’ in relation to its oversight of administrators and professional trustees.
The regulator has held discussions with the Department for Work and Pensions (DWP) in relation to a potential new bill that could introduce new powers and regulations regarding trusteeship and governance.
In its latest annual report, the regulator said it had spoken to DWP representatives regarding new powers related to information gathering, as well as its planned oversight of administrators and professional trustee companies.
“We have made strong progress in obtaining the DWP’s support to update TPR powers in this area with a commitment to consulting on these issues with the summer and a bid being made for a Pension Reform Bill in the next parliamentary session.”
The Pensions Regulator
Under the third of TPR’s four “priority outcomes” set out in its annual report, relating to scheme governance, the regulator stated: “Our delivery is on track regarding the government’s future consultation on trusteeship and the broader regulatory framework.
“We have made strong progress in obtaining the DWP’s support to update TPR powers in this area with a commitment to consulting on these issues with the summer and a bid being made for a Pension Reform Bill in the next parliamentary session.”
TPR said it needed to “optimise use of our existing information-gathering powers” alongside any further legislative changes, which it said would “inform any discussion around new powers”.
The regulator has declined to comment further on the discussions.
In the DWP’s “roadmap” document outlining how it envisages pension reform over the next few years, the government stated that it would “also consider changes to the framework of regulation and enforcement to ensure it is fit for the future”.
“We plan to consult on measures to improve the governance of trust-based schemes later this year, to ensure the necessary safeguards and flexibilities are in place to meet the demands of the evolving pensions landscape,” the document stated.
With larger pension funds expected to emerge through ‘megafunds’ and ‘superfunds’ initiatives, the government said regulation needed to “evolve to ensure it is actively delivering the reforms in the sector, stewarding the market towards our priorities of better retirement outcomes and economic growth”.
TPR seeks statutory backing for admin and trustee oversight
Regulatory experts told Pensions Expert that a potential Pension Reform Bill would likely include more formal powers of oversight for TPR over professional trustee firms and pension administrators.
TPR has highlighted both areas as of systemic importance to the pension system. In April it began voluntary engagement with the largest professional trustee firms, and in September last year it announced a similar project with administrators.
Anna Rogers, senior partner at Arc Pensions Law, said pension schemes and employers may not welcome “yet more pensions reform”, but added that it was “heartening” that the regulator was taking issues around administration and data seriously.
“TPR has existing powers to require information or just to ask questions, and the annual scheme return can be quite a powerful tool,” Rogers said.
She added: “I hope that TPR will be successful in pushing for a Pension Reform Bill and will be able to find ways, using existing powers or new powers, to raise the standard of governance in defined benefit schemes. It’s hard to resist the conclusion that it will end in regulation of professional pension trustees.”
The regulator’s prudential approach is evolving
David Fairs, partner at LCP and a former executive director at TPR, said the government’s “megafunds” proposals – which will result in fewer, larger pension funds – were also shaping the regulator’s view of risk and its oversight of the pensions industry.
This was reflected in TPR’s move to a “prudential supervision” approach, Fairs explained, designed to scrutinise culture, decision-making and processes at large institutions.
Lou Davey, head of policy at Independent Governance Group (IGG) and also a former TPR executive, added that the regulator has been looking closely at trusteeship for a number of years.
“TPR has drawn comparisons with the governance of FTSE 100 companies and the standards around them, and perhaps moving to more closely align with those,” she said.
“The regulator is looking to really get under the skin of how things are run – whether there are any risks it might need to address or good practice it would want to share.”
Davey said she would “not be surprised” if TPR sought to make accreditation mandatory for all trustees, or to make it compulsory for there to be at least one accredited trustee on every trustee board.
“The growing influence of a small number of professional trustee firms means that TPR is looking for closer monitoring, oversight, and regulatory powers over professional trustee firms.”
David Fairs, LCP
Recent surveys from WTW, LCP and Hymans Robertson have highlighted the growing influence of professional trustees and sole trusteeship in particular.
Fairs said: “The growing influence of a small number of professional trustee firms means that TPR is looking for closer monitoring, oversight, and regulatory powers over professional trustee firms, consistent with these trustees having governance of these larger, systemically important pension funds.”
Administrators under the microscope as dashboard deadlines continue
Meanwhile, as more pension schemes and providers connect to the pensions dashboards digital ecosystem, TPR has been scrutinising administration providers.
“At the moment, TPR has relatively few powers or regulatory tools in relation to administrators,” LCP’s Fairs explained. “It can issue improvement notices but in reality can do little else.”
“The DWP needs to be convinced that it’s a worthwhile use of its time and resources to create and push through a bill and the regulations that would be required.”
Lou Davey, IGG
IGG’s Davey said the extent to which TPR is successful in its bid for a Pension Reform Bill would depend on how much it is able to achieve with its current powers.
“TPR would like there to be a bill – it makes life a lot easier if it has the statutory footing and recourse to take action,” Davey said.
“On the other hand, the DWP and the parliamentary teams need to be convinced that it’s a worthwhile use of their time and resources to create and push through a bill and all the regulations that would be required.
“There needs to be a good case for making changes to the law. TPR would need to show that it’s not possible to effect change without changes to the law.”
